A Deeper Look – HRO and Health Care Exchanges

HRO is an ever changing set of services, processes, technologies, and client needs. My HRO colleague Amy Gurchensky recently covered one of the emerging service areas in benefits: health care exchanges. I wanted to know more about active employee exchanges and arranged for educational briefings with Aon Hewitt and Mercer since both are already in this market.

Both of the HRO service providers have found similar reactions from insurers to the exchanges. As with any new concept, some carriers are more progressive and recognize changing market needs. Other carriers are more cautious and methodical and want to know more about how the new models work, how to underwrite the risk, client implications, etc.

Even though health care exchanges offer preconfigured selections with price advantages for employers, exchanges are still group programs and the employer is still the plan sponsor for active pre-65 participants. Aon Hewitt’s corporate exchange offering includes services to help clients meet their obligations as plan sponsors.

Exchanges are a bundled service. Along with structured plans from participating carriers, traditional benefits administration services are also included. Both Mercer and Aon Hewitt have great depth in providing end-to-end participant services, handling escalations, and advocacy. For example, Mercer’s exchange offering includes clinical case management support as well as program oversight and audits. Aon Hewitt includes both tier one and tier two call center support and advocacy services for participants with issues or claims that are more complex and require a greater level of case management and carrier interaction.

Both companies are major league benefits administrators, and I wondered how the exchanges may impact revenues as clients move to an exchange-style service. Mercer sees the revenue impact as neutral initially and additive overall; Aon Hewitt views the exchange markets as an important natural extension of its traditional benefit administration services.

Today, health care exchanges are a very small part of benefits HRO, but there is significant growth potential. Mercer will be testing service models in rolling its Mercer Benefits Choice Exchange (MBCE) for employers with less than 1,000 employees, so expect to see the changes and evolutions that are common with emerging services. It will not be surprising if more HRO vendors launch exchanges, and even a couple large carriers may decide to offer exchange services directly as the market develops.

The future of health care private exchanges is not dependent on whether or not the current U.S. health care reform is amended or survives. Research indicates that up to 90% of employers offering health care coverage intend to continue to offer coverage in 2014.  Employers will continue to need options that help them offer competitive benefits at controllable costs, and innovative HRO service providers will continue to develop new services and options to meet those changing market needs.

Linda Merritt, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.

The Only Certainty is Uncertainty: Managing the Impact of Health Care Reform on HRO

A now perennial concern for U.S. employers is the cost of providing health care to employees. It is number one on the list of the “2011 Top Five Total Rewards Priorities,” a study sponsored jointly by Deloitte and the International Society of Certified Employee Benefit Specialists (ISCEBS).  Here are the top five for this year:

1. The cost of providing healthcare benefits to active employees
2. The willingness of employees to pay for an increasing portion of benefit plan coverage and to manage their own reward budget
3. The ability of reward programs to attract, motivate and retain talented employees
4. The ability to adjust to and comply with current and future provisions of Health Reform legislation
5. Clear alignment of Total Rewards strategy with business strategy and brand.

Employer uncertainty on the requirements and cost of compliance with U.S. health care reform continues to the point where “the only certainty is uncertainty,” according to the study. In the meantime, 65% of 242 respondents said they had no plans to change employee-sponsored coverage. Only 9% of employers indicated that they plan to drop employer-sponsored coverage and pay the penalties with the expectation of further legislation and required changes. Lastly, about 20% of employers said they would consider converting to a defined contribution plan for health care and encourage employees to join an exchange.

Eight-five percent of employers are highly certain that an impact of health care reform will be higher costs for both the employer and employees. Seventeen percent are also concerned they will fall in competitiveness with peers in other countries.

If most employers are planning to change health care benefits at this time, what are they doing? They are closely monitoring the situation with 73% reporting they will re-evaluate benefits due to health care reform in the next 12 months.

Uncertainty is also an opportunity. Besides the obvious opportunity for continued benefits consulting, there are other opportunities for HRO. For example, total rewards statements are more than nice fluff. With effective communications, employers can help employees appreciate the full value of their wages and benefits, support the case for understanding cost shifts to employees, and even help with the attraction and retention of talent. Also, dependent audits have been a good foot-in-the door technique the last couple of years, ensuring value benefits go to only covered employees. Finally, absence management is another growing HRO service line with great potential to assist employees in difficult times and impact the bottom line when well-managed.

In core benefits administration, highlighting expertise in monitoring, understanding, and implementing regulatory benefits changes shows clients they will have a capable partner in their corner, no matter the changes ahead. Being the knowledgeable resource of choice in the midst of health care reform uncertainty and rising costs can be a leverageable factor in attracting new clients and deepening the relationship with current clients.

Is your HRO provider the rock you can rely on in times of uncertainty?

Linda Merritt, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.

Health Care Reform – Who’s Got Your (HRO) Back?

There are HRO service providers that can do a wonderful job in a stable environment, efficient and effective. But who can do the job in an uncertain financial and regulatory environment? Which vendor partner/s has your back in times of change?

Today I watched as President Obama signed the historic health care reform bill. If you’re an employer, are you prepared for what the recently changed regulations will do to your business and how they will impact your employees? Are you comfortable that all of your employee and delivery systems are ready for compliance – across internal and, potentially, multiple third-party vendor systems?

As recently as February, Mercer found that seventy-one percent of U.S. employers have done nothing to prepare in advance. This is reasonable since no one was assured what new regulations, if any, would be passed. But prepared or not, some elements will go into effect in 2010, and every impacted employer and their HRO partners are going to need to scramble. 

At the end of the day, compliance is an employer’s responsibility, and wholesale benefit policy and plan reviews require big “C” consulting. However, an experienced HRO vendor partner with top-notch subject matter expertise can advise on changes that are required to keep your information and systems in compliance. And a primary multi-process provider can help work across the often myriad of systems, programs and interfaces that will need to be updated.

 I just took a quick scan of some of the HRO service provider websites. As you would expect, major benefits administration vendors like Hewitt, Mercer and Towers Watson have been long active on the topic; research, web info, bulletins, podcasts and webcasts. And today, Hewitt is hosting one of its bi-weekly healthcare reform webcasts, and Mercer is hosting one on the recent changes to mental health parity and addiction equity regulations.

ACS, via its consulting arm Buck Consulting, has prominent health care reform information available. ADP also has an easy to find section with weekly updates, and is already listing when some health care reform regulations are going into effect over the next few years. And Aon has a website area with weekly briefings and access to health care reform information.

If you are a current HRO client of benefits health and welfare administration, payroll, employee self services, or recruiting – who has kept you informed along the way? Who has called you today?

Linda Merritt, Research Director, HRO, NelsonHall